With a lack of fresh catalysts to fire up some action, major currencies traded in a tight range this week. But it looks like there was enough in the news cycle the comdolls were able to take the lead while the Swiss franc takes the ‘biggest loser’ honors.
Notable News & Economic Updates:
- Gold tumbles with silver on Monday as ‘panic’ selling grips Asian open
- China inflation: factory-gate price growth quickened in July, higher than expected
- Oil up 3%; forecast for better U.S. fuel demand feeds rebound
- Dow, S&P 500 scale new peaks on Tuesday as $1 trln infrastructure bill passes
- Cross-chain DeFi site Poly Network hacked; Hundreds of millions potentially lost
- Fed officials ramp up taper talk on upbeat job openings report
- Diners and doctors help UK economy to extend recovery
- Global Covid cases on track to add 100 million by early next year without help to poorer nations, WHO says
- White House calls on OPEC to boost oil production as gasoline prices rise
- API data show U.S. oil inventories down 816,000 barrels: sources
- Fund managers position for transitory U.S. inflation
- EU exports to Britain rise in June as they fall to rest of the world
- Over half of crypto tokens stolen in $610 mln hack now returned, Poly Network says
- S&P 500 grinds to another record to close out winning week
Intermarket Weekly Recap
It looks like a case of the Summer doldrums in the financial markets this week, characterized by relatively low volatility and choppy price action across most of the major asset classes. The global economic calendar was relatively light on major updates and the news cycle was nearly void of shocking headlines to get any momentum started. Fortunately for the traders who aren’t out enjoying the Summer and hanging on to the market’s every move, there were a few noteworthy moves to look back on.
First, there was the flash crash in gold and silver right at the start of the week, mostly attributed to Asia’s reaction to the better-than-expected U.S. employment update last Friday. This update likely sparked speculation of U.S tapering/stronger dollar ahead, typically a bearish environment for the precious metals. When the pressure comes in a low liquidity environment., like the start of every week, markets can move fast without traders on the other side to absorb the rush of orders.
Crypto assets were a big mover this week as well to the long side, a surprising feat despite the U.S. Infrastructure Bill that threatened the crypto ecosystem with regulations that were basically impossible to comply with. We also saw the biggest hack in crypto history as the Poly Network was drained of $600M in value earlier in the week, but that didn’t seem to deter the bull run. It’s possible that traders are mainly focusing on rising value of the Ethereum network as ETH is being burned at a rapid pace since the London upgrade last week, as well as an imminent release of smart contracts on the Cardano blockchain.
In terms of the equity markets, stocks gained in value as earnings reports show strength and a recovering economy, enough to continue to attract massive amounts of capital to global equity funds. The latest U.S. inflation data was also a likely driver for higher equity prices (and positive risk sentiment) on Wednesday after a weaker-than-expected read on core CPI likely lead to some reduction of Taper bets.
And as far as the oil market, oil prices were able to make a recovery after a drop on Monday, likely on expectations that demand will continue to improve, and despite a call from U.S. President Biden to OPEC to increase oil production.
In the forex space, volatility was relatively low and choppy among most of the major currency pairs, but we did see the Swiss franc make a directional move early in the week. There doesn’t seem to be a direct catalysts for its early week weakness, but there is speculation that its recent rally may draw action from the SNB to intervene and limit the franc’s price appreciation.
In terms of winners, it looks like a toss up between the Canadian dollar and New Zealand dollar, with the former likely benefitting from the rebound in oil prices on Tuesday and the latter likely finding buyers ahead of a likely rate hike from the RBNZ next week.
- U.S. risks fiscal cliff in Fall amid partisanship on debt
- Yellen warns Congress again on U.S. debt limit as Republicans balk
- U.S. small business optimism drops as labor shortages persist
- U.S. productivity growth slows in Q2; labor costs revised down in Q1
- U.S. Senate passes massive bipartisan infrastructure package
- July consumer prices jump 5.4%, but core inflation rises less than expected
- Fed’s Barkin: U.S. “closing in” on taper, but could still take a few months
- Fed’s Kaplan says Fed should start tapering in October
- Fed’s George says it’s time to ‘dial back the settings’ on monetary policy
- U.S. producer prices at more than decade high; jobless claims fall
- University of Michigan preliminary consumer sentiment for Aug. 2021: 70.2 vs. 81.2 in July
- Fresh U.K. Covid-19 Data Boosts Hopes That Delta Variant Can Be Held in Check
- U.K. economy expanded 4.8% as expected in Q2
- U.K. manufacturing production up 0.2%, industrial production slumped 0.7%
- Diners and doctors help UK economy to extend recovery
- German exports jump despite supply bottlenecks in industry
- ECB must tighten policy if needed to counter inflation, Weidmann says
- Sentix Investor Survey: 22.2 vs. 29.8 prev; Surprisingly little cheering, surprisingly few fears
- Eurozone ZEW economic sentiment index slumped from 61.2 to 42.7
- German ZEW economic sentiment index down from 63.3 to 40.4
- Germany ZEW economic confidence declines sharply
- German consumer prices rose strongly in July in line with forecasts
- In June 2021, both Italian exports and imports grew (+25.4% and +32.6% respectively) y/y
- In June 2021, Industrial production down by 0.3% in euro area and by 0.2% in the EU month-over-month
- In July 2021, the prices of frequently purchased French goods sold in hyper and supermarkets fell by 0.1% year on year
- Euro area international trade in goods surplus €18.1 bn, €14.8 bn surplus for EU
- The Swiss Unemployment Rate remained at 2.8% in July 2021
- Swiss Producer and Import Price Index rose by 0.5% in July
- Swiss franc shakes off intervention threat with broad appeal
- Canada to create international vaccine passport in months
- Canada PM Trudeau planning snap election, seeks approval for COVID response
- New Zealand quarterly inflation expectations up from 2.05% to 2.27%
- New Zealand house prices hit new record
- Australia expands COVID lockdown over concern virus has spread from Sydney
- Australia’s NAB business confidence index slumped from +11 to -8
- Westpac: AU consumer sentiment down but not out
- Melbourne extends COVID lockdown; ‘no jab, no job’ in Sydney
- Australia’s MI inflation expectations slip from 3.7% to 3.3%
- Canberra to go into lockdown mode starting today